|
|
| Fig. 1: Global investment in renewable power and fuels, by technology, 2019-2023. [3] (Image Source: S. Ingall, after REN21. [3]) |
The economic recovery from the Covid-19 pandemic and responses to the global energy crisis have spurred a surge in clean energy investment worldwide, fundamentally reshaping the energy landscape. [1] In 2023, global clean energy investment reached over $1.7 trillion, outpacing fossil fuel spending with a ratio of $1.70 spent on clean energy for every $1 spent on fossil fuels, an increase from a 1:1 ratio just five years ago. [1] Despite these transformative shifts, fossil fuels remain dominant in the global energy mix, accounting for 82% of energy consumption in both 2021 and 2023. [2] When including hydro and nuclear power, which have notable environmental impacts of their own, approximately 93% of the world's energy still relies on high-impact sources. This dependence underscores the immense challenge of transitioning to sustainable energy sources.
Solar PV and wind power have emerged as the dominant forces driving renewable energy investments. In 2023, solar PV accounted for 63% and wind for 35% of all new renewable energy investments, highlighting the increasing global commitment to a cleaner energy future. [3] However, their continued growth depends on overcoming challenges related to grid integration, resource variability, and policy consistency. Investment dynamics, particularly declining risks and increased cost competitiveness, play a central role in sustaining this momentum.
Solar photovoltaic (PV) and wind power continue to lead the renewable energy sector in terms of new investments. In 2023, solar PV accounted for 63% of the total new renewable energy investments, amounting to approximately $392.7 billion, a 12.5% increase from the previous year. [3] While this growth signifies ongoing confidence in solar PV, it represents a deceleration compared to the significant jumps of 39% in 2021 and 44% in 2022. [3] Fig. 1 shows this upward trend in global investments across solar PV, wind power, and other renewables from 2019 to 2023, highlighting solar PV's dominance in the renewable energy market.
Wind power investments reached $216.6 billion in 2023, marking a modest growth of 2.3% compared to the previous year. [3] This slower pace follows more substantial increases of 11% in 2021 and 7% in 2022. [3] Within the wind sector, offshore wind power, referring to wind farms located in bodies of water, experienced a surge in investment, growing by 79% to $76.7 billion. This surge offset a 17% decline in onshore wind power investment, which involves wind farms on land. [3]
Between 2009 and 2017, risk premiums for these technologies declined significantly in Germany, Italy, and the UK. This was driven by technological advancements, credible policy frameworks, and improved data availability. [4] For solar PV, declining costs and modularity have made the technology increasingly attractive to investors, while onshore wind has faced challenges related to resource variability and technical complexity. [4] Nevertheless, the reduced financing costs for both technologies have catalyzed their expansion and solidified their roles as cornerstones of the clean energy transition.
In the coming decades, solar PV and wind power are expected to play increasingly vital roles in meeting global energy demands. Projections from the U.S. Energy Information Administration suggest that investments in these technologies will continue to grow as governments and private investors aim to address energy security and climate goals. [5] However, challenges such as curtailment risks, price volatility, and grid integration remain significant barriers to scaling these technologies further.
The reduced investment risks identified by Egli et al. point to the importance of stable policies and reliable assessment tools in sustaining growth. [4] Lessons from the past decade underscore the need for governments to balance market-based incentives with long-term guarantees to attract private capital. In addition, the role of offshore wind as a rapidly growing segment highlights the importance of continued investment in grid infrastructure and storage solutions to accommodate higher shares of variable renewables.
The global energy transition is advancing, driven by substantial investments in solar PV and wind power. In 2023 alone, solar PV and wind attracted significant funding, with solar PV reaching $392.7 billion and wind $216.6 billion. These investments highlight the pivotal role of renewables in reshaping the global energy mix. However, with 93% of the world's energy still reliant on high-impact sources, the scale of the transition challenge remains vast.
Policies like the U.S. Inflation Reduction Act (IRA) are critical in directing investments toward impactful, sustainable technologies. [6] The sustained growth of solar PV and wind hinges on maintaining credible policy frameworks, improving grid integration, and addressing residual investment risks. With continued innovation, financial commitment, and clear regulatory oversight, the energy sector can move closer to achieving a balanced, low-carbon future.
© Scott Ingall. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] "World Energy Investment 2023,", International Energy Agency, May 2023.
[2] "BP Statistical Review of World Energy 2022," British Petroleum, June 2022.
[3] "Renewables 2024 Global Status Report: Energy Supply," REN21, 2024.
[4] F. Egli, "Renewable Energy Investment Risk: An Investigation of Changes Over Time and the Underlying Drivers," Energy Policy 140, 11428 (2020).
[5] "International Energy Outlook 2023," U.S. Energy Information Administration, October 2023.
[6] J. E. T. Bistline, N. R. Mehrotra, and C. Wolfram, "Economic Implications of the Climate Provisions of the Inflation Reduction Act," Brookings Papers on Economic Activity 2023, No. 1, 77 (Spring 2023).